Thursday, 9 July 2009

Coming up short

Silvio Berlusconi hosting the G8 summit only seems to enforce the idea that the meeting is little more than a jolly boys (and girl) outing. I'm not saying it's going to be a typical Berlusconi party with topless 18 year old girls but the Italian host only makes the meeting more farcical than it already is.

Arguably this is a heck of a shame as the top 8 countries wield a lot of power, particularly in relation to overseas aid. The G8 nations promised in 2005 to deliver $22 billion in aid by 2010 but four years since this commitment only $7 billion has been spent. Organisations such as Bono's ONE blame this on countries like Italy and France who have only given 3% and 7% respectively of their pledged commitment but one has to remember that one of the other major talking points in L'Aquila, the global financial crisis has put pressure on all countries.

However, whilst the recession is a cause for concern in the developed world it can be a matter of life and death in Africa. Overall growth in sub-Saharan GDP is set to drop from 5.5% in 2008 to 1.5% in 2009. This is better than a lot of countries but when considering population will continue to grow at around 3% this is potentially disastrous with 53 million additional Africans living on less than $2 a day.

From a broader economic view this may be a blessing in disguise. More and more politicians from around the world are questioning the worth of giving to a continent which loses $150 billion through corruption a year and many economists believe that aid leaves African leaders unmotivated to make changes. Despite this, with businesses failing in both America and Western Europe I would hope that more venture capitalists look towards Africa for a more sustainable source of income for various sub-Saharan nations. Foreign investment in Africa is only around 1.7% at the moment but the Organisation for Economic Cooperation and Development predicts an increase by 16.8% this year.

One success story is Liberia, a country torn apart by civil war in 1993 and plagued by political instability until 2005 is now reforming. Companies such as BRE are investing in rubber plantations. Now Liberia's predicted GDP per capita growth for the next decade is 6.3% compared with -0.5% for the last decade.

So my advice for the G8 leaders? Enjoy the sunshine.